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Psychic Distance, Innovation, and Firm Performance
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
2014 (English)In: Management International Review, ISSN 0938-8249, Vol. 54, no 5, 581-613 p.Article in journal (Refereed) Published
Abstract [en]

Previous research suggests that internationalization improves a firm's ability to innovate, but the effect of internationalizing into specific target markets or destinations on the innovation ability of firms has not been fully investigated. This study examined whether the psychic distance between target market and home market affects firms' propensity to innovate. The starting assumption was that perception of a high degree of differences and subsequent environmental uncertainty when expanding into psychically distant markets triggers strategies for interacting and integrating with the market environment. These include producing and adopting innovations to processes and products and to organizational strategy, structure, and administrative procedures to cope with the new environment and overcome uncertainties. These innovations and the associated competitive advantages can improve firm performance. Hypotheses regarding the relationships between psychic distance, innovation, and firm performance were tested here by structural equation modeling using data from 186 export ventures into 23 international markets by Swedish companies. The results indicate that the link between psychic distance and firm performance is mediated by innovation.

Place, publisher, year, edition, pages
2014. Vol. 54, no 5, 581-613 p.
Keyword [en]
Psychic distance, Innovation, Internationalization, Firm performance, Uncertainty
National Category
Business Administration
URN: urn:nbn:se:uu:diva-235159DOI: 10.1007/s11575-014-0219-2ISI: 000342224800001OAI: oai:DiVA.org:uu-235159DiVA: diva2:761466
Available from: 2014-11-06 Created: 2014-10-29 Last updated: 2014-11-06Bibliographically approved

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Drogendijk, Rian
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